From April 1, 2020 uniform stamp duty across the country will be applicable irrespective of the location (states) where you live in. Currently, stamp duties are levied by the state governments and each state levies its own rate of stamp duties on different financial products. But as a trader or investor what do the new uniform rates mean to you? Let’s check it!
Uniform stamp duty takeaways
Currently, when you enter into a capital market transaction, stamp duty is payable on a per contract note basis. This amount is mentioned at the bottom of the contract note. Brokers are required to charge stamp duty to customers at the rates applicable to the state where the client’s account address is located. Then, these stamp duties are remitted by the broker to the respective states. Check the old and new stamp duty here.
In December 2019, the Ministry of Finance issued a circular announcing uniform stamp duty on all financial market transactions which will be effective from 1st April 2020. Under the new arrangement, the stamp duty will be charged on financial products at a uniform rate and the exchanges, clearing corporations and depositories are responsible for the collection of stamp duties from the brokers and they will remit the amount to the Central Government.
|New Uniform Stamp Duty|
|Segment/ Type of Trade||New Rates||Charged On|
|Equity Cash Delivery||0.015%||Buyer|
|Equity Futures & Options on Settlement|
|Currency & Interest Rate Futures & Options||0.0001%||Buyer|
What does the new uniform rates mean to you?
New uniform rates will bring down the cost for the traders and investors by 50% as it will be charged only on the buy trades. The only states where active traders would lose out are Andhra Pradesh, Haryana, and Telangana where there is a cap on stamp duty currently. And Karnataka traders could also lose out due to lower rates they enjoy currently. However, in the active markets of Maharashtra, Gujarat and West Bengal, this move is likely to bring down the overall stamp duty liability for traders and also for investors.
In absolute terms, the intraday trades in the equity segment will be charged a uniform rate of Rs.300 across the country which was earlier charged between Rs.200 and Rs.300 by most of the States.
For delivery trades in the equity cash segment, the rate will be Rs.1500 per crore only on the buy trades. Earlier delivery selling was also charged.
Benefits will be more pronounced for currency traders as the cost is reduced drastically from Rs.200 per crore to just Rs.10 per crore.
Earlier for intraday and normal trades in derivatives, many States were charging between Rs.250 to 300 per crore. This is now made Rs.300 for intraday and Rs.200 for normal trades in derivatives.
There was no stamp duty earlier for offline transfer of shares using DIS (delivery instruction slip), now there will be based on the consideration amount entered on the DIS slip at the same rates as delivery trades (0.015% or Rs 1500 per crore collected from the seller).
The Stamp Duty to be collected before the execution of off-market transfers involving the transfer of securities in the depository system. Hence, the stamp duty will be collected from the transferor/pledgee before the execution of off-market / pledge invocation transactions in the depository system. Stamp Duty will be payable by the pledgee on the transfer of securities pursuant to the invocation of pledge. The stamp duty is required to be calculated on the market value of the securities.